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HUL’s profitability stance is a risk for its richly-valued shares

If sales growth is slow, margins are flat and this situation could continue, then why should investors pay top dollar to own the FMCG bellwether?

October 20, 2021 / 01:09 PM IST
HUL’s profitability stance is a risk for its richly-valued shares

HUL’s sales growth was a combination of 4 percent of volume growth and 7 percent price growth. (Representative image: Shutterstock)

Why Hindustan Unilever is so laser-focused on keeping its EBITDA margin at the 25 percent level is a mystery but that is at the heart of its performance in the September quarter. HUL’s obsession with its profitability coincided with a period when parent company Unilever had turned its attention to profitability, guiding for a 20 percent operating margin target. Some clues on what foreign-owned FMCG companies could do was available way back in August, when we had written about how local...

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